Hoping to conserve dollars and support the rupee, which hit an all-time low this August, India this year ratcheted up taxes on imported gold and added restrictions on the use of imported gold.

While the constraints have had the desired effect of radically bringing down India’s gold import bill, an unintended consequence has been that gold jewelry exporters are struggling to find all the precious metal they need to fill orders from abroad.

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In the period between April and October, exports of gold jewelry plunged by 54% from a year earlier to around $4 billion because of a shortage of bullion.

Jewelry exporters say the new rules are coming in their deliveries to overseas buyers, just when orders to the U.S. and Europe are showing signs of picking up.

“We fear that India is going to miss the bus,” said Pankaj Parekh, vice chairman of the Gem and Jewelry Export Promotion Council.

While jewelry exporters are exempted from the new taxes and restrictions, they depend on the broader bullion market for their raw materials. The new constraints have discouraged banks and trading companies that are allowed to import gold from bringing in much of the precious metal

The banks and trading companies say they have slowed their gold imports as the paperwork has become more cumbersome and their margins have thinned.

Jewelry makers, who are among India’s most competitive exporters, say they just don’t have the raw materials now and warn that they will lose market share to Chinese companies. China, which recently beat out India to emerge as the world’s biggest gold consumer, is eyeing a bigger share of the global jewelry export market as well.

Chinese exporters are already increasing their supplies to Dubai, the largest destination for Indian jewelry, while Turkey is gradually grabbing Indian market share in the Europe.

“China may swallow us in a year or two, if the gold supply remains inadequate,” said Mehul Choksi, chairman and managing director, Gitanjali Group, one of India’s leading jewelry retailers and exporters.

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